Inheritance tax and joint accounts

[Centurion07]

Just had a discussion with my other half about inheritance tax and joint accounts.

We were talking about her mum, who is still alive, and the fact she has opened a joint account with my missus in order that the contents of said account won't form part of the estate in regards to IHT.

Checking out the .gov website it turns out that in "most" cases contents of a joint account are indeed exempt from IHT with no mention of who deposits the most or anything similar.

What I couldn't find out though was what's to stop my missus emptying the account the same day a deposit is made by her mother and then not having to pay IHT if her mum died the next day?

Not that she would, but I just can't believe that it's possible to circumvent the annual gift limit or the 7-yr death rule surrounding gifts in this way and that IHT is so easy to avoid.

[anonymous-user]

You have misunderstood. IHT calculations would involve the joint account balance contributed by the deceased

There is likely to be no need for probate if the account is set up properly, but the account is included for IHT purposes

Start here https://www.gov.uk/hmrc-internal-manuals/inheritan...

[Centurion07]

Good man.

That's pretty much what I thought woukd be the case.

[twokcc]

JPJPJP said:

You have misunderstood. IHT calculations would involve the joint account balance contributed by the deceased

There is likely to be no need for probate if the account is set up properly, but the account is included for IHT purposes

Start here https://www.gov.uk/hmrc-internal-manuals/inheritan...

Very useful link thanks JP3.
Should the original poster not also be looking at house ownership - depends on value and how much in bank account.as well as husband or ex husband

Just in process of doing this with revised will for myself and some useful advice from my solicitor about reducing IHT bill.
Just need to live another 7 years which didn't seem a problem at end January -who knows now?

[rfisher]

WTF is this about from that HMRC page

Example

Andrew, Bill and Claire share a joint account. They all contribute to it. Andrew dies and his proportion of the account passes by survivorship to Bill and Claire. After Andrew’s death, the entitlement of Bill and Claire should take into account Andrew’s contributions.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

????

[anonymous-user]

There was quite a fuss when the HMRC manuals were published on line. There are quite a few redactions - often shown like that - of stuff that HMRC claims would give tax evaders too great an insight into how HMRC operates.

[anonymous-user]

The key points are,

• Bank accounts in sole name get locked as soon as death is notified to the bank.
• Joint accounts continue uninterrupted, with the survivor having full access to the account.
• Inheritance tax is a completely different subject.

[Centurion07]

How on earth is it a completely different subject?!

[Cheib]

Centurion07 said:

What I couldn't find out though was what's to stop my missus emptying the account the same day a deposit is made by her mother and then not having to pay IHT if her mum died the next day?

I don’t see how that wouldn’t be looked on as a gift by HMRC. I suspect given how they operate they would put the onus on you to prove it wasn’t. I don’t see how just because it was passed through a joint account it wouldn’t get caught by that.

If you think about it....if it did anyone that was dying could set up a joint account and gift money to escape IHT.

So I am pretty sure it doesn’t...